Conditions of a Mortgage

After you apply for a mortgage and your mortgage professional submits your application for approval, the underwriter may ask you to clear certain conditions before making a decision. To fulfill these conditions, you usually need to supply additional documents to clarify financial facts within a specified period of time.

Features

• An approved mortgage usually comes with a few conditions set by the underwriter. At this stage, the underwriter usually provides you with a checklist of borrower conditions that you need to satisfy before getting a full approval. These conditions often require you to provide additional documents containing explanation, correction and verifications. Satisfying these conditions may take time because you often need to obtain documents from third parties.

Examples

• If you don't have credit histories or scores, the underwriter may ask you for payment history of utilities, such as gas and electricity. If you have unconventional income sources, you may have to get an accountant to prepare a profit and loss statement. The underwriter may also ask you to explain or correct inconsistencies in credit reports, tax statements and pay stubs. Other possible conditions include verifications of employment and income, housing history and letters from donors who provide you with funds.

Timing

• Satisfying the mortgage conditions is the stage that delays the approval of most loans. Many times, this is because various third parties take longer than expected to produce the documents you need. For example, your place of work may be going through a busy period and take more than one week to provide a verification of employment. If you have bad debt, it also takes time for you to clear the collection account and obtain relevant documents.

Clear to Close

• Once you satisfy all the conditions, the lender issues a clear to close, which means the lender will soon be ready to provide the mortgage funds. It usually takes two to three days from a clear to close for the lender to process your funds. Aiming to get a clear to close at least one full week before closing provides you with enough time in case it takes longer for the lender to process your funds.

Who is an Underwriter?

A Mortgage Underwriter is an insurance professional responsible for evaluating the risk of a mortgage application, from the financial institution perspective. In this job, the mortgage underwriter is responsible for determining the maximum amount of mortgage granted.

There are three tasks that a mortgage underwriter completes each day: evaluate mortgage applications, determine total mortgage amount, and create risk analysis reports.

When the underwriter receives the loan file, she looks at the total reported household income, down payment amount, and purchase price of the property. A series of calculations are performed to determine if this request falls within the acceptable range of risk, based on the standard criteria of the lender.  A computer software program now performs these calculations.

The total amount of mortgage granted is based on the information provided by the applicant and the guidelines used in the computer program. The mortgage underwriter can adjust this value based on the forecasted value of the property, economic climate and other factors. Banks and financial institutions adjust their levels of acceptable risk all the time, balancing profit opportunities and risk to the institution.